Ahsan Shere SyedFollow

Degree

Master of Science in Finance

Department

Department of Finance

School

School of Business Studies (SBS)

Date of Submission

Fall 2024

Supervisor

Dr. Sana Tauseef,Associate Professor and Director QEC, Department of Finance

Submission Type

Research Project

Document Type

Restricted Access

Pages

x, 51

Keywords

Risk, Payout Ratio (POR), Stock Returns, China A Share

Abstract

This paper delves into the intricate dynamics between dividend payout ratio (POR), firm risk, and stock returns within the context of the Shanghai and Shenzhen Stock Exchanges for the period 2001-2021. Through an extensive analysis of data spanning various market conditions and policy regulations, the study uncovers noteworthy relationships and moderation effects that shed light on investor perceptions and market dynamics. Our findings reveal consistent negative correlations between firm risk and POR, indicating that investors tend to view higher POR positively, associating it with lower perceived risk. Concurrently, a positive relationship is observed between POR and stock returns, suggesting that firms with generous dividend payouts may yield more favorable returns for investors. The study also investigated the impact of market downturns and policy regulations and found that results were more pronounced after the implementation of “Comply-or-explain policy” that profitable companies have to pay 30% of their earnings in dividend or explain if they don’t do so. Moreover, the study investigates the moderating influence of factors such as asset growth and debt levels on these relationships. We found no significant moderating effect of asset growth and the combination of asset growth and debt-to-asset on the relationship of payout and risk/return.

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